Property investment in the Netherlands has a tax consequence. There are multiple situation how you invest, we try to touch most of them in this article.
Property investment in the Netherlands
You live abroad and you wish to invest in the Netherlands. After you made the purchase you have become a non-resident tax payer. That implies you are not living in the Netherlands, but you do have an asset in the Netherlands for which you need to pay tax.
Dutch tax number
In order to be able to actually file the non resident income tax return, you need a Dutch tax number. We refer to that number as the BSN number. The Dutch tax number or BSN number is normally obtained when you register yourself with the city hall. Then automatically the resident tax number is issued.
Please note, you are not a Dutch tax resident. Do not register at city hall as a regular tax resident, emphasis you are not living in the Netherlands, only own property in the Netherlands. To obtain such a non resident tax number a different procedure exists.
Dutch tax resident
If you are living in the Netherlands you obviously can invest in Dutch property as well. This article is about investments not being your own home. An investment that is not in your own home is taxed in Box 3. The Dutch tax system is a boxing system and the taxation of property is taxed in Box 3.
Nonresident tax payer and resident tax payer
A nonresident tax payer and a resident tax payer, pay the same amount of tax, have the same tax credits. Taxed is the so called WOZ value minus a possible debt you took out in order to be able to purchase the Dutch property. The balance of that amount is taxed in Box 3. How much tax you actually pay depends on the amount that is taxed. We have since a couple of years tax brackets in Box 3. As the tax rates will go up, take 1,4% tax as a good indication.
Taxed is the value, not the actual rental income. Nor can you deduct any costs. The value used is the so called WOZ value. A value determined by the city based on similar type houses recently sold. The WOZ value of the house we can manually reduce in the income tax return. That is possible based on the rent actually received and the contract you have with the tenant. If the house is for instance a pied-a-terre, then the value cannot be reduced.
Transfer tax is 8% for investment properties. We are sometimes asked by persons that would like to purchase a property in the Netherlands for their child. The transfer tax is then 8% and the parents have become Dutch nonresident tax payers for the house. That implies an annual income tax return to be filed and tax to be paid.
If not the parents would purchase the house, but the money is loaned to the child and the child purchases the house, then the transfer tax is 2% and under conditions even 0%. The house is then taxed in Box 1 and could result in a refund, instead of tax to be paid.
If parents are afraid their child will sell the house and run to Vegas to spend the proceeds, the parents can put a mortgage on the house, via a notary. Then the house cannot be sold without their permission.
Tax is exciting
We think tax is exciting and we are already excited about filing your nonresident income tax return for EUR 390 incl VAT.